WASHINGTON (TNND) — A sudden escalation in the U.S.-China trade war has threatened to undo months of progress between the world’s two largest economies.
The unraveling of what had been productive talks between the two superpowers began late last week when China announced new global export controls on its coveted rare earth minerals and products containing these minerals.
China said the measures were taken “in accordance with laws and regulations to improve its export control system, better safeguard world peace and regional stability, and fulfill international non-proliferation obligations.”
U.S. Trade Representative Jamieson Greer accused China of having “wildly overstepped the bounds of what’s acceptable,” and that China’s “power grab won’t be tolerated.”
President Donald Trump responded by announcing an additional 100% tariff on Chinese imports to the U.S., effective November 1, bringing the average tariff rate on Chinese goods to more than 150%—an effective embargo. Trump also said the U.S. will place export controls on “any and all critical software.”
Trump’s announcement Friday sent Wall Street into a tailspin, but stocks rebounded Monday following a post by Trump Sunday that said: “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!”
The post wasn’t enough to quell China’s reaction to the countermeasures. On Monday, China’s Ministry of Foreign Affairs said imposing high tariffs “is not the right way to deal with China.”
“China urges the U.S. to promptly correct its erroneous practices, follow the important consensus reached during the two heads-of-state phone call, and resolve respective concerns through dialogue based on equality, mutual respect, and reciprocity, properly manage differences, and safeguard the stable, healthy, and sustainable development of China-U.S. relations. If the U.S. insists on going its own way, China will certainly take resolute measures to safeguard its legitimate rights and interests,” ministry spokesperson Lin Jian said.
Further raising the economic stakes, on Tuesday, both countries will initiate increased port fees on each other’s commercial ships.
The escalatory measures are all but certain to deal a blow to American supply chains and, consequently, inflate prices on everyday goods. It’s poor timing, given the inflation rate has been steadily increasing since May and the holiday shopping season is just around the corner. Paired with a job market that’s losing steam—the economy lost 32,000 jobs in September, according to ADP—a tit-for-tat with the world’s largest exporter of goods is the last thing the U.S. economy needs.
This week, the International Monetary Fund and the World Bank will hold their annual meetings in Washington. Treasury Secretary Scott Bessent said he expects staff-level talks between the Americans and the Chinese to occur on the sidelines.
Whether Trump and Chinese President Xi Jinping hold their scheduled meeting in South Korea at the end of the month has been called into question. Bessent said he believes the leaders will still meet, but in an earlier social media post, Trump said, “Now there seems to be no reason to do so.”
